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Oil prices hit a new intraday high today, surpassing the previous record of $70.85
Most experts agree that the price of oil is only going to go higher and if the USA “intervenes” in Iraq, some believe that we will soon see oil at $100 per barrel.
I would love to ask our VIP Members for their feedback on this topic:
1. How do you see the price oil affecting international travel to Costa Rica and
2. What effect would this have on the price of Costa Rica real estate?
Scott Oliver – Founder
WeLoveCostaRica.comScott, it may go as high as 80.00 but I do not think that the oil industry will “out price” them self than what is it good for if the economy will come to a stand still. Airline tickets will go up most likely another 20% but travel will continue. Do SUV drivers slow down with $3.00 per gal.? NO! I do not believe that there will be an “intervention” with Iran even a Bush will think twice now after Iraq to start more trouble. Real Estate in CR? Business as usual – only going up.
I forgot to mention: In Europe they are paying already for some time $5.00 and more per gal. for reg. even thou they complain also, but live goes on…….
I read an article today in a financial mag predicting the bottom dropping out of the oil market this year and crude going down to $35 to $40 a barrel. If not, I agree life will go on. The more things change, the more they stay the same.
I live in an area which is dependent on tourism dollars and various prices do certainly affect the tourism quantity as well as quality.
But, it isn’t necessarily a ‘real’ problem, rather a ‘perceived’ problem, which then becomes just as real.
When California tanks, our summer tourism count slows a bit and everyone who does show up acts as though they have no money because they are scared to death of the rather tight margins inwhich they live their over credited house-of-cards lives. We locals look at them with their $100,000+ 34′ dual engine 800hp powerboats complete with their (well) plasticized wives, and color matching hauling device (Hummers seem popular this spring) and wonder how they have the nerve to claim they are too stretched to buy a house lot and build a vacation home, when they spend about $1,000 per w/e to be here.
Then I watch them put 50 – 150 gallons of avgas (currently $3.50/gal) in the boat every other day while they are here and feel (only a little) sorry for them. Thing is, they would use the same amount of gas if it were $2.00 or $5.00 per gallon.
Then when they buy the house and lot, instead of a spending budget of $750,000, it might only be around $600,000.
So, what we get is a slightly less quantity of folks buying a little less while they are here… but the bulk of them keep on coming…. and buying. That’s important because they themselves have the perception that less of them are coming and that they aren’t going to spend anywhere near the same amount of money – but then they do!
In CR, I would guess that the areas where the biggest gringo bucks flow smoothest, like Tamarindo, the same thing will happen because they are the same folks I deal with here in my home town.
I would also imagine that the Ticos look at us the same way I look at the Californians.
Now in the wintertime when we are hosting the older folks or snowbirds, they are much more cost conscious and things like the price of gas makes a bigger difference. They have a “fixed income” and milk that to death. They use it to tip less to the waitresses, etc, but they still come to town too.
In CR, I do wonder how the places which cater to that crowd and the ‘future ex-pat’ crowd will fare. My guess is that they are justifyably worried.
As far as real estate, I would guess that it might slow a bit and prices might stabilize with the sizes and amenities inside the homes might be a bit less, but I think it would take a major California crash to change it in CR dramatically. That wouldn’t necessarily be bad either.
I also believe that a ‘major crash’ scenario would have another effect which my architectural business experienced on 9-12-2001. 9-11 had the effect of making people take serious stock in their lives and it helped them get off the dime and make their decisions to get out of the rat race and build here – away from the big city. I had customers say things like ‘This is the last straw – we can’t take another year of living in CA, we are moving ahead of (our 5-years to retire plan) schedule even if it means less to live on.’
Bottom line? If gas is expensive, it’s expensive to everyone and all the prices go up. If I were penny pinching for a vacation and had a budget of $2,000 and 1 week and were determined to leave my hometown area, the price of airline tickets, gas, etc., is going up for every destination. CR still looks like a major bang for the buck deal to me.
Just prior to 9/11 oil was $23 a barrel (if I remember correctly). I read an article on AOL about how if oil hits $100 a barrel, the housing market will bottom out because too much of a person’s disposable income will go towards energy costs. In fact, high gas prices is impacting our ability to sell our house because we don’t live near the city where most people must go to work to afford a house in my area.
Petrol has always been that high in Europe and the UK. Let’s all forget this CR business and move to Venezuela where gas is TWELVE CENTS a gallon!! And they have more than enough for the next 200 years, unless of course, the US invades and attempts to assassinate Chavez again. It just hit $2.70 in my area, so we minimize the use of two cars and don’t drive around aimlessly. And because we are 7 miles to the nearest anything, you can use up a lot of gas getting to the market.
Regular gasoline hit at about 2.84 a gallon yesterday. Since I live in an area with alot a snowbirds it hasn’t seemed to affect the traffic around here. There are still too many cars on the road! Most will be heading back up north shortly. Housing has slowed down. With NO insurance companies wanting to write homeowners polices due to hurricanes, the only company that is writing is the state plan. Premiums are expected to go way up again, and again. Retirees years ago that bought mobile homes can no longer afford to insure them, and thay most likely will not even be able to sell them. Yet people still ask “Why do you want to move to Costa Rica?”
The answer is clear to us.Scott, with you opening a new discussion I may have to revise my earlier opinion and you may be right with a barrel of oil hitting even higher than my 80.00. I just read (4-18 at 8pm est) at “antiwar.com” that Bush indeed will not rule out nuking Iran. Well, folks, we having seen nothing yet. One more reason to speed up our move and say like Martin Luther King, after I saw CR for the first time 4 weeks ago:”I have seen the promised land”
KarlI think a big part of the problem for us here in the U.S. is our lack of conservation. I have spent quite a bit of time in Europe and gas has always been very expensive$3-$6 dollars a litre. But they drive cars that get a minimum of 25-35 mpg, turn there heat off or very low at night. In apartment buildings common area lights are set on timers and home lights are turned off when not in use. And there are many other examples. It seems like everyone here has at least one giant SUV or other large vehicle, ac runs all day,lights left on, 3 tvs to a home,supermarkets stuffed with a 100 varieties of chips, cereal etc..the simple answer to $3 a gallon gas is a car that gets 30-40 miles per gallon, how about a hybrid 60mpg!!
We are a nation of consumers. They can hike the price of oil to $100 a barrel and that will not stop the Hummer people from filling their gas tanks, but it will certainly put a crimp in most other’s lifestyles. The population of the US is a tiny fraction of the whole world, but we consume massive amounts of everything — from energy to goods. We are a throwaway society and the only one I know of that has to rent a storage unit to pack away the stuff that will no longer fit in the house. We are gluttonous and I think we should ban those monstrous SUVs outright and flood the market with Smart Cars!
I can see the high price of oil being good for the Costa Rican economy in a couple of ways.
First, it could increase tourism traffic here, as tourists look for bargains. Air travel is a relatively energy efficient way to get around, and Costa Rica is a bargain destination. Those already overstressed by high oil prices, and there are many of them, will simply stay at home, but those with a little more discretionary income and still looking for an inexpensive vacation destination may turn to Costa Rica.
Similarly, middle class retirees (and there are legions of them) may begin to rethink remaining in the United States and Canada where the cost of living is very high. So many things here in Costa Rica are much more reasonably priced that people on fixed incomes will likely flock here in the next few years. That flood of North American immigrants will surely cause real estate prices in Costa Rica to rise. It will also cause other prices to go up, unless controlled by the government, but Costa Rica should remain relatively inexpensive for a very long time.
Actually it is my understanding there is no shortage of oil. Production is at its highest level and there are no plans by OPEC or the other producing nations to lower production. As prices rise, demand will fall and before we know it there will be an oil glut in the world and prices will fall. It is not OPEC or the oil companies that are causing the high prices per barrel, it is the speculators on the NY Merchantile Exchange that are responsible for the high prices so in effect it is greed that is behind it all. I guess I am not a doom and gloom sort of guy. My glass has always been at least half full and at times is spilling over. In my life (and I’ve been around awhile) the end of the world has been predicted many times and somehow the human race seems to muddle through.
In the long run I can’t see any long term affect on tourism or housing prices. What will determine prices in CR is not building costs but how much people are willing to pay. I also cannot see a huge influx of people from the US moving to CR because of gas or living expenses. The people who move are looking for a simpler way of life and are willing to forgo some of the conveniences we have in the US. Most people here are spoiled and would not be willing to give up the life style they have in the US even if it means cutting back a little on cunsumption.
You’re right, there is NO shortage of oil — none whatsoever, but now that the Chinese want their Hummers they are sucking up a lot of the supply, and driving the prices up. And then you have the stock market — don’t even get me started on that cabal. Actually, I’m one of the people who IS leaving the US because of the cost of living; why should I pay $1000 a year in property taxes on a house half the size of the one I built in CR on which I pay $78 a year in taxes? I heard a stat not long ago that 40% of the gringos go home after two years — not only do they not want to give up the things we take for granted, they don’t even want to give up their Ding Dongs, Ho-Ho’s, Fruit Loops and the like in favor or an abundance of fresh fruit and vegetables.
Well, there’s no shortage of oil RIGHT NOW, but let that third of the world’s population that lives in China buy as many vehicles per capita as (say) the population of Bulgaria and it’ll be a very different picture. The oil reserves that are being tapped today are the degraded remains of dinosaurs and other prehistoric life. The only dinosaurs around today are those who behave like the world’s supply of oil is inexhaustible.
While we did not move to Costa Rica to avoid the high cost of living in the U.S., we certainly know folks who did. And there’ll be more and more of them as the economic noose tightens around the financial necks of the American middle class. That’ll be especially true for those retiring on modest fixed incomes.
Marvella, you complain about $1,000 in property taxes on your home in the U.S. For most U.S. residents, that would be what you call property tax heaven. Worse still, however, will be the impact of homeowners’ insurance premiums. With the costs of Huricanes Katrina, Rita and whatever’s on its way this hurricane season to pay, plus the recent tornadoes in the midwest, homeowners’ insurance is going to go off the chart. And, unlike property taxes, you don’t get a vote on the cost. And since most homes in the U.S., even those occupied long-term by retirees, still have mortgages, going without homeowners’ insurance is not an option; it’s a requirement of the mortgage contract.
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